bne -

Bulgarian Prime Minister Boiko Borisov announced on March 16 that his government is set to abandon plans to build the 2000-MW Belene nuclear power plant. The news is unlikely to impress Russia, which was due to build the plant, but suggests a rare minor victory for the EU in its bid to diversify energy dependence away from Moscow.

Russian state firm Atomstroyexport is contracted to build Belene, but Bulgaria has been arguing with Moscow on the cost. Borisov told the BNT TV channel that he sent ministers to Moscow in February to tell Russian officials that Sofia will not build the plant, but plans to pay for one of its two 1,000 MW nuclear reactors that has already been built. Bulgaria will instead try to install it at its operational 2,000 MW Kozloduy nuclear power plant, he suggested.

However, the PM held back from sounding Belene's final death knell, referring to the large costs already incurred by Bulgaria, which he put at BGN1.4bn (€716m), and suggested that the government could put it to a referendum.

The announcement looks likely to bring to a close a torturous saga that has been running for decades. Launched in the 1980s, the project for the construction of Bulgaria's second nuclear power plant was frozen in the 1990s due to a lack of funding. Bulgaria and Russia agreed in 2006 to restart it, but price disputes, a lack of strategic investors, the global economic crisis, and uncertainty surrounding the future plant's seismic safety have all colluded to delay the project.

With initial costs estimated at €3.9bn, Russia recently hiked the price tag to €6.3bn. Bulgaria, which hired UK-based banking group HSBC to advise it on the financial structure of the project and the set up of a project company, has said it would not accept a price in excess of €5bn.

The project's supporters say the two 1,000 MW reactors planned for Belene would help Bulgaria restore its dominant position on the Balkan electricity export market, which it lost with the closure of four Soviet-made 440 MW reactors at the Kozloduy plant prior to its accession to the EU in 2007. That move, meant to dispel Brussels' fears over nuclear safety, left Kozloduy with two operating Soviet-made reactors of 1,000 MW each. Without overhaul, their lifespan will expire by 2019.

Meanwhile, opponents say there is no firm evidence that demand for Bulgarian-generated electricity in Southeast Europe will rise in the foreseeable future, whilst the potential price of Belene's output is unclear. They also claim that the plant would deepen Bulgaria's energy dependence on Russia even further, and voice concerns about the safety of Russian-made nuclear reactors.

Calls from Bulgarian lobby groups and environmentalists to scrap the project have increased since the March accident at Japan's Fukushime nuclear power plant, but Belene supporters say Bulgaria would have to pay around €1bn in compensation to Russia if it walks out of the project.

The news is unlikely to go down well in Russia, which has already displayed its displeasure with Sophia for pulling out of the Bourgas-Alexandroupolis oil pipeline in December, after months of prevarication. Should Belene really go down the tubes it will represent a rare minor victory for the EU in the ongoing geo-political tussle between Moscow and Brussels over Europe's energy diversification. Russia has proved adept at picking off individual EU states to take part in projects to tie Europe closer to its energy suppliers in recent years, the numerous bloc members helping to secure the apparent triumph of the South Stream pipeline over the EU's Nabucco being a prime example.